Apple ordered to pay $625 million in patent dispute with VirnetX

Andrew Chung

3 Min Read

An Apple logo hangs above the entrance to the Apple store on 5th Avenue in the Manhattan borough of New York City, July 21, 2015. REUTERS/Mike Segar

NEW YORK (Reuters) - Apple Inc (AAPL.O) must pay VirnetX Holding Corp (VHC.A) more than $625 million for using the patent licensing company’s Internet security technology without permission in its FaceTime and iMessage features, a federal jury in Texas said on Wednesday.

The award was more than the $532 million VirnetX had sought before the trial began on Jan. 25 in Tyler, Texas. The jury said Apple’s infringement was willful.

VirnetX stock was trading at $9.30 after hours, up 94 percent from its Wednesday close. Apple was down 45 cents to $95.90 in after-hours trading.

The verdict, though a blow for Apple, does not pose a threat to the company, which reported in January that its cash pile had reached $216 billion. Still, the amount is high for a patent case.

Apple issued a statement vowing to appeal. “We are surprised and disappointed by the verdict,” the company said. “Cases like this simply reinforce the desperate need for patent reform.”

Also on Wednesday, Apple filed court papers asking U.S. District Judge Robert Schroeder to declare a mistrial, saying VirnetX’s attorneys had misled the jury during closing arguments. It is not known when Schroeder will rule on that request.

”The jury saw what we have been saying all along: Apple has been infringing VirnetX’s patented technology for years,” VirnetX lawyer Jason Cassady said in a statement.

VirnetX, a Nevada-based company that derives most of its revenue from licensing patents, first sued Apple in 2010 over the iPhone maker’s use of secure networks, known as virtual private networks, and secure communications links in Apple’s FaceTime video conferencing application.

It was the second time VirnetX and Apple battled in court. In November 2012, a jury found Apple infringed four VirnetX patents with its iPhone, iPod Touch and iPad products, as well as with its Mac computers, awarding $368.2 million in damages.

The U.S. Court of Appeals for the Federal Circuit, the nation’s top patent court in Washington, D.C., partly overturned that verdict, saying there were problems with how the trial judge instructed jurors on calculating damages.

The retrial also incorporated claims from a second lawsuit VirnetX filed against Cupertino, California-based Apple in 2012 over newer versions of the Apple security features as well as its iMessage application.

VirnetX was assigned the four patents by Science Applications International Corp in 2006, court papers show.

In May 2010, VirnetX won a $200 million settlement from Microsoft Corp over the VPN technology.

The case is VirnetX Inc v. Apple Inc in the U.S. District Court for the Eastern District of Texas, No. 12-cv-855.

Reporting by Andrew Chung, Additional reporting by Julia Love in San Francisco; Editing by Alexia Garamfalvi and Cynthia Osterman